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Morgan Stanley upgrades 'retail survivor' Target

Shoppers browse the aisles during a Black Friday sale at a Target store, Friday, Nov. 23, 2018, in Newport, Ky.
John Minchillo | AP

Morgan Stanley upgraded Target on Monday, saying it sees improving margins and a more, "balanced," risk/reward for the retail giant. They called Target a "retail survivor," likening it to Walmart, Amazon and Costco.

The firm upgraded the stock to equal-weight from underweight and reiterated its $67 price target.

"First, we think TGT's margin erosion (a core tenet of our prior Underweight view) is likely to moderate in the near-term. We are modeling flattish EBIT margins in 2019, below guidance for ~10 bps expansion yet an improvement from 35 bps decline in 2018," analyst Simeon Gutman said. "Second, we think the risk that TGT misses its margin guide is appropriately reflected in the stock's relatively inexpensive valuation."

Shares of Target rose slightly in premarket trading to $71.05. The retailer, whose shares are up 7% this year, reports earnings on Wednesday.